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Monday, July 28, 2008

Older Landed Homes Now Within Reach

Source : The Sunday Times, July 27, 2008

Prices are attractive in suburban areas but buyers need to be aware of the property's condition

Owning a landed property may feel like a distant dream for some after the prices of such homes surged significantly last year, but the dream may not be as distant as it seems.

If one looks hard enough in suburban locations, such homes can be found for as little as $800,000.

Price growth for landed homes is slowing in line with the general market, and suburban bungalows and terrace houses have already registered a drop, according to data. -- ST FILE PHOTO

The good news for potential buyers is that price growth in landed homes is slowing in line with the general market.

Indeed, suburban bungalows and terrace houses have already registered a drop in prices, according to data from Savills Singapore.

For instance, in the second quarter, prices of suburban terrace houses dropped 6.8per cent to an average price of $605 per sqft, compared with a 2.4per cent rise in the first quarter.

Overall, official data from the Urban Redevelopment Authority on Friday showed that landed home prices rose 0.6per cent in the second quarter, down from a rise of 3.9per cent in the first three months of the year, and 23.4per cent for the whole of last year.

While the downward growth trend may continue, landed home prices are at least supported by a limited supply of such homes and a relatively illiquid market, market watchers say.

As more houses are being converted into apartment blocks, landed homes could become rarer in 15 years' time, says the director of Savills Residential, Mr Ku Swee Yong.

He foresees an annual rise of at least 5per cent in the general landed home market in the next three years even as growth slows.

What to look out for

Those with a small budget of around $800,000 should check out locations such as the MacPherson area, or Jalan Hari Raya in the Thomson area, according to Mr Eugene Lim, assistant vice-president of ERA Asia-Pacific.

Those with a slightly bigger budget of around $1million might like to consider older, 99-year leasehold landed homes in Paya Lebar, Hougang and Rifle Range Road.

They could also look at the terrace houses in Choa Chu Kang, Kallang, Pasir Ris, Sengkang, Sembawang and Toa Payoh, or semi-detached homes in Jurong West.

A 2,399sqft terrace unit in Pasir Ris Heights, for example, was sold for $870,000 last month, while a bigger 3,674sqft unit in the same area went for $818,000 in April.

Generally, though, landed homes below $800,000 are few in number, are likely to be very old and are often single-storey terrace houses. Buyers would likely need to spend money on renovation, said Mr Lim.

With older homes, potential buyers should pay particular attention to the structure and look for signs of leakage, he said.

But even if a buyer has money set aside for renovation, said experts, he may find it tough securing a contractor, as the construction sector is stretched in the current market.

Aside from location and the cost of renovation, buyers should also consider the shape of the site on which the house sits.

'Odd-shaped land means there is less effective land area for built-up space, and that compromises on space maximisation as well as the prospect for redevelopment or even sub-division,' said the head of KF Property Network, Dr Tan Tee Khoon.

Fortunately, most houses sit on rectangular or square-shaped plots.

'Other practical considerations include ensuring that there is no termite problem and that the property has no illegal extensions or erection of structures,' he added.

Also, buyers typically want a landed home for their own use. Those buying for investment should note that landed homes are generally less attractive to tenants than condominium units because of the lack of facilities, said Savill's Mr Ku. Many tenants also do not want to be bothered with maintaining a landed property.

Median rents for suburban terrace units have remained stable this year at $1.84 psf - the same median rent level for semi-detached houses in the second quarter. Median rents for surburban bungalows have fallen to $2.40 psf in the second quarter, from $2.67 psf in general.

'In general, the lower rental value is reflected in the lower price on a per square foot basis. This is why landed prices are a laggard to the general market,' said Mr Ku.

Beware extra costs

Generally, landed homes below $800,000 are few in number, likely to be very old, and are often single-storey terrace houses. Buyers would likely need to spend money on renovation.